The Sanofi Pension Scheme has signed a £760m (€895m) buy-in policy with Legal & General, insuring the liabilities associated with around 2,900 retirees.
L&G said the transaction was the pension scheme’s first pension risk transfer with it, after being a long-term asset management client.
“It is always particularly rewarding to work with long-term clients like Sanofi and to enable them to further de-risk their scheme,” said Gavin Smith, head of pricing and execution at Legal & General Retirement Institutional.
“We take pride in providing certainty to trustees and members, and this agreement is another great example of our ability to support schemes at all stages of this journey.”
The trustee was advised on the transaction by Aon and legal advice was provided by CMS. Legal & General received legal advice from Macfarlanes.
Aon’s Mike Edwards said the buy-in was “a great example of how the best value for money risk reduction is achieved through a full understanding of different risk exposures”.
“This knowledge can then inform the right size and shape of transaction design,” he said.
The buy-in comes after a settlement was agreed in November 2020 between the pensions regulator, the parent company of the Sanofi group, and the trustees of Sanofi Pension Scheme.
This included an upfront payment into the scheme of £37m, a legally binding agreement that any dividends paid to the wider Sanofi group are matched by payments into the scheme, and a new guarantee package for the scheme from Sanofi SA.
The guarantee package includes a level of annual deficit repair contributions designed to ensure the scheme becomes fully funded against a prudent long-term funding target, and additional protection of up to £730m in the event of insolvency for roughly 20 years. The regulator said the scheme should be fully funded on a buy-out basis by this time.
The regulator had opened an investigation in 2019 following concerns that group restructurings had eroded financial support for the UK pension scheme.
James Mullins, head of risk transfer at Hymans Robertson, today said buy-in and buyout volumes for the full year of 2021 could still be over £25bn despite a slow first half of the year, as “insurers are now at one of their busiest ever levels”.
According to the consultancy, total pension scheme buy-ins and buyout volumes reached £6.8m in the first half of 2021, with a further £925m ‘Assured Payment Policy’ transaction.
Earlier this month, a £2.2bn buy-in-to-buyout deal for Metal Box Scheme was revealed.